Quantitative easing may have hampered growth, says Andrew Sentance

Former Bank of England policymaker claims later asset purchases accentuated
the squeeze on real incomes by holding down the value of the pound

Andrew Sentance, who sat on the Monetary Policy Committee between 2006 and 2011, said it was likely that the second and third rounds of the Bank's £375bn asset purchase programme - launched in October 2011 and the summer of 2012 - had “hampered growth" rather than helped it.Photo: Daniel Jones

Quantitative easing may have slowed Britain’s recovery, according to a former Bank of England policymaker.

Andrew Sentance, who sat on the Monetary Policy Committee between 2006 and 2011, said it was likely that the second and third rounds of the Bank's £375bn asset purchase programme - launched in October 2011 and the summer of 2012 - had “hampered growth" rather than helped it.

“If anything it accentuated the squeeze on real incomes by holding down the value of the pound," he said at a conference organised by the Institute of Economic Affairs.

"I think if the pound had risen, import prices and inflation would have come down more quickly and we would have seen this rebound that came in 2013 more quickly."

Mr Sentance said unconventional monetary policies such as QE were not designed to be used for a protracted period of time.

"In the short term, QE and big interest rate cuts can deliver a big boost to confidence and financial markets, and stabilise the economy," he said. "But I think the discussion needs to move on to how do we get out of this – [the MPC is] still waiting to get round to this discussion properly."

Roger Bootle, managing director of Capital Economics, said loose monetary policies had also reinforced the idea that borrowers would always be bailed out in a crisis.

He said while the Bank of England was right to keep interest rates at their record low of 0.5pc and launch QE, he had "a lot of sympathy for savers", who had endured years of financial pain because of the ultra low returns on their savings.

"The message that's being given long term for policy is not a very good one. It’s saying that when push comes to shove, this system is going to bail out the housing market, and bail out people who over borrow with no consideration for savers."